You, investor, are a sucker

No, I won't say this kind of harsh things to our fellow active investors. It's the author of a blog posted here. No matter how much you disagrees, it's still a good read.

Death Bonds

Saw this title on the cover of current issue of BusinessWeek today in dentist's office. It not only caught my eyes, but also sent a chill down my spine --- given that my dentist was sharpening her gears at that time...

Anyhow, here is how the security, which is formally known as Life Settlement Backed Security, works:

• Life Insurance policy holder pays insurance company premium for the eventual big payout on the policy holder's death.
• With a "death bond" market, the policy holder now can sell his policy to a third party (life settlement broker) at any time.
• The investment banks, hedge funds will then purchase the policy from the broker and continue paying the premium on that person's policy and will receive the payout on his/her death.
• Very much like an MBS, the bankers will then pool individual life insurances together, and then issue bonds backed by cash flows on these policies.
• According the the article, the return can be attractive --- close to 8%, located right between bond and stock returns. And more importantly, the return on death bonds is completely uncorrelated to the equity and bond market. If you are a firm believer of EMH and "the market portfolio", this is golden!

Data Visualization

They rule is a web site that visualizes the network of the largest corporations and their boards of directors. An useful and fun way to look at the business world.

I got the link to website from visualcomplexity. The site provides a host of data visualization projects. Some of them are quite interesting:

• Windows Server V.S. Linux
• "The big picture" of CNet
• NYC Subway Map Redesign

Internet-call service SunRocket shuts down

SunRocket Inc., the second biggest U.S. supplier of Internet phone services, appeared to have shut down its business on Monday without notifying its customers, which total more than 200,000.

Callers to its customer service line heard a brief recorded message, saying: “We are no longer taking customer service or sales calls. Goodbye.”

Now that is a nice way to still generate some buzz when your business is on death row.

Microsoft ESB Guidance

A reusable sample ESB (Enterprise Service Bus) built on top of Microsoft Biztalk Server 2006/.NET 3.0.

The guidance application deals with many critical aspects of a SOA messaging bus, such as service address resolution, message routing, message transformation, exception handling, etc.

Download the application and powerpoint presentation here.

Real Estate, Subprime and Credit Market

As the housing market keeps turning for the worse, the subprime sector of asset backed market has been deteriorating since the beginning of the year.

In the last couple weeks, amid the fallout of the Bear Stearns hedge funds, there have been signs that this weakness is spreading to other sectors of asset back securities and even the broad credit market.

Here are some of the relevant indices tracked by MarkIt:

• ABX - Home Equity (BBB rated):

• ABX - Home Equity (AAA rated):

• CDX - Investment Grade:
• CDX - High Yield (AAA rated):

Rogue Traders: Made in China

I came across two (rather old) stories about rogue traders in China:

• China Aviation Oil's $500 million fiasco in Oil future trading in 2004; and
• Chinese State Reserve Bureau's infamous trader, Liu Qibing's, more than $200 million loss in copper market in 2005.

The interesting thing about these financial disasters is how they resemble the rogue trader at Barrings Bank decades ago:

• Arbitrage trader starts to take massive unauthorized positions.
• One man effectively in control of both front office (trading) and mid-office (risk management).
• The use of false account to hide losses

It seems Chinese Government Agencies and SOEs still have a long way to go in properly managing their operational as well as market risks.

Windows Live Messenger Add-In API

Seeems to be a nice way to create an alert/query service interface. The API is incredibly easy to use. You can probably create your own Messenger Robot in minutes (a automated trade alert, for example).

BTW: There is really no SDK to install, as the required assembly comes with Windows Live Messenger itself.

• A simple guide on how to write Windows Live Messenger Add-Ins.
• In case you need some ideas on your next messenger agent, check this out.

Buffett lunch goes for $650100

And Mohnish Pabrai finally got it.

Here is his CNBC interview after winning the bid.

A good summary on Dhandho Investor...